The great digital broadband migration

On Dec. 8, Michael Powell, commissioner of the Federal Communications Commission addressed the Progress and Freedom Foundation on the topic of convergence and the role of the FCC in regulating it. The full text of his speech can be found at http://www.fcc.gov/Speeches/Powell/2000/spmkp003.html. Today, I want to speak to you about a great migration that is having a profound effect on the communications industry and on our society as a whole. It is not a movement of people, though it will change how people live. Rather, it is a fundamental shift of technology—the arrival of "disrupting technologies" (in the words of Clayton Christensen, the author of Innovator’s Dilemma). And it is the unleashing of the power of "creative destruction," the phrase coined by the late great economist Joseph A. Schumpeter. Convergence is not just a technological phenomenon. Given the technical underpinnings, we see the collapsing of previously distinct markets and competitors. Convergence is radically altering economic assumptions and underlying cost structures. It is changing the game of capital formation and altering business models. The culmination of these changes is what I am referring to by the Broadband Digital Migration. The challenge for us is to make a similar leap from analog-rooted regulations to ones that are applicable and relevant to the digital environment. We need an agenda that is reflective of the Broadband Digital Migration. I offer just a few starting points. · A pointed focus on innovation incentives. Conventional economics holds that price competition makes markets efficient. Antitrust policy is largely designed to promote such competition. Schumpeter recognized, however, that competition through innovation is perhaps more important than price competition. Government regulation, he insisted, should promote innovation. · Greater reliance on deregulation and competitive markets. The collapse of centrally-planned economies around the world (most notably the Soviet Union) can be attributed to many things, but perhaps most central is the lack of oxygen they provided for innovation and entrepreneurs. In a Schumpeterian New Economy where such forces are the engines of prosperity, we must foster competitive markets, unencumbered by intrusions and distortions from inapt regulations. · Rationalizing the regulatory structure ("A bit is a bit"). We must make aggressive use of forbearance and public interest flexibility to work to harmonize regulatory treatment in a manner consistent with converged technology and markets. Critical efforts include such things as rationalizing inter-carrier compensation to avoid arbitrage. · Doctrine Development. We need to go to school to learn the technological underpinnings that affect policy. Moreover, we need a greater understanding of innovation theory and economic incentives. This includes a deeper understanding of capital markets and capital formation. It includes greater depth in antitrust doctrine and market economics, particularly the literature on network effects and the unique attributes of information industries. · Accelerated and efficient regulatory procedures. Our bureaucratic process is too slow to respond to the challenges of Internet time. One way to do so is to clear away the regulatory underbrush to bring greater certainty and regulatory simplicity to the market. We need a greater emphasis on enforcement, rather than "by the grace of us" regulation. We must avoid the temptation to "shape" the development of markets and instead let the market mechanism make those decisions. · Unbending Independence. Finally, in this period of incessant change, and even carnage, many will seek the shelter of regulation to protect themselves in the fierce storm of the market. Others (often the same people) will seek to affirmatively use regulation to harm or burden a competitor. The FCC will have to be judicious in its judgments, untainted by favoritism and staunchly above the political fray, if it has any hope of being an honest, respected and meaningful actor in this new era.

The great digital broadband migration

News | 12/14/2000 5:00 am EST

To keep reading, get a free trial.

Already a Subscriber?

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us